Contract Law: Analysis of Case Study

This article provides an analysis of a case study on Contract Law. It discusses the elements of a contract, including offer, acceptance, consideration, intention, legality and consent. The article examines different scenarios and explains whether or not a contract was formed based on the facts provided. The case study involves Kate and different parties, including Meghan, Will, Harry, and Liz. The article also cites relevant cases and legislations to support the analysis.

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Contract Law
Analysis of Case Study
01-Apr-18
(Student Details: )
(Word Count: 1720)

Contract Law
Meghan
The main issue of this case revolves around a possible contract being drawn between Kate and
Meghan based on the facts provided in the case study.
A contract shows a promise undertaken in a legally binding agreement, where each party
promises something, be it payment of consideration, or undertaking the act as has been promised.
In order to create any contract, there is a need for different elements to be present in the contract.
These include offer, acceptance, consideration, intention, legality and consent1. Consideration is
the value which is paid by one of the contracting parties, to the other party, for the other party
carrying on the performance of act covered under the contract2. The value of consideration can
be anything which is mutually decided between the parties, but it is important that the
consideration has economic value in the eyes of law as per Thomas v Thomas3.
Another important rule which relates to consideration is that it has to be present and cannot be
past. In Re McArdle4, a wife lived with her three grown up children in a house. One of the
children’s wives had undertaken some work and the children promised to give her a payment of
£488, for which a document was signed to give effect to this transaction. However, the court held
that the promise had been unenforceable as the work had been undertaken before promise had
been made, resulting in the contract having inadequate consideration owing to presence of past
consideration.
1 Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
2 Andy Gibson and Douglas Fraser, Business Law (Pearson Higher Education AU, 2013)
3 (1842) 2 QB 851
4 (1951) Ch 669
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Contract Law
In the present case study, the contract formation of Kate and Meghan revolve around this very
aspect of elements of contract. In this matter, Meghan had told Kate that she would give her the
painting for the free tutoring which Kate had given to Meghan in the past for etiquette, finishing
and deportment lessons. Thomas v Thomas would make this consideration value having
economic value as tutoring costs money. However, this is the case of past consideration, which
based on Re McArdle would make the consideration value in invalid consideration.
Thus, on the basis of this discussion, it can be concluded that a contract was not formed between
Kate and Meghan owing to the lack of element of consideration. This means that Kate cannot sue
Meghan for giving her the painting and for getting it delivered to her on Wednesday March 12th.
Will
The main issue of this case revolves around a possible contract being drawn between Kate and
Will based on the facts provided in the case study.
The first step in formation of any contract is for one party to offer certain terms to another party
in a clear and express manner, which becomes the offer of the case. It is important to make the
difference clear between an offer and an invitation to treat5. When it comes to invitation to treat,
the inviting party is not obliged to sell the products for which invitation has been made as was
established through Pharmaceutical Society of Great Britain v Boots6. Partridge v Critenden7
dictates that that the advertisements which are put in the newspapers are invitation to treat.
However, there are cases where these can be deemed as offer, where the unilateral offer is based,
5 Jill Poole, Casebook on Contract Law (Oxford University Press, 2016)
6 [1953] 1 QB 401
7 (1968) 2 All ER 425
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Contract Law
as was held in Carlill v Carbolic Smoke Ball Co8. When an offer is made, it is important that the
same is accepted by the other party in the duration for which the offer had been open9.
In the present case study, an advertisement had been placed in the newspaper by Kate to sell the
painting for a price of $3,000. This was not a unilateral offer, as it could not be accepted by mere
performance of the terms of contract, which were open for anyone; so, Carlill v Carbolic Smoke
Ball Co would not apply. Thus, based on Pharmaceutical Society of Great Britain v Boots this
advertisement would be deemed as an invitation to treat. Will made the offer in this case where
he expressed his intention of purchasing the painting for $3,000.
However, he stated that the offer was open only till 5pm on Friday 7th March. This means that
Kate had to accept this offer till this time. She accepts the offer of Will on 10 am on Friday 7th
March. Even though Will though that Kate had changed her mind, the offer was never revoked,
and this thought was never conveyed, resulting in the offer being open for being accepted. Only
after Kate gave her acceptance, did Will inform her of her thoughts. The contract by then had
already been formed. The later communication of Kate and Will would not matter here as the
contract had already been created by that time.
Thus, on the basis of this discussion, it can be concluded that a contract was had been formed
between Kate and Will due to acceptance of Will’s offer by Kate in the given time frame for
which the offer was open.
8 [1893] 1 QB 256
9 Michael Furmston and G.J. Tolhurst, Contract Formation: Law and Practice (Oxford University Press, 2010)
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Contract Law
Harry
The main issue of this case revolves around a possible contract being drawn between Kate and
Harry based on the facts provided in the case study.
Where the offer is to be revoked, it is to be done before the acceptance is given on such offer as
was held in Dickinson v Dodds10.
After an offer has been made by one of the parties, it is important for the other party to accept the
offer. The general rule regarding the date of acceptance is that the date on which the acceptance
actually reaches the offer making party, is to be deemed as the acceptance date for the purpose of
contract formation11. Though, this rule has one leading acceptance and this is of postal rules.
These rules present that for the purpose of contract formation, the acceptance date is the date on
which the letter of acceptance is posted by the accepting party. The reason for taking this view is
that the postal office is given the status of being an agent of the offer making party; which means
that the acceptance by the agent is that of the principal12.
Another important point which has to be carefully noted in context of acceptance is that it has to
be provided in the mode which had been specified in the offer13. In Eliason v Henshaw14, it was
held that where the offering party provides a specific manner of acceptance but does not mention
it as the only method of accepting the offer, the acceptance given through any other method
would be deemed as legally valid only when the same was more advantageous to the offer
making party. Tallerman & Co v Nathan’s Merchandise15 provides that the posting of latter is to
10 (1876) 2 Ch D 463
11 John W. Carter, Contract Law in Australia (LexisNexis Butterworths, 2013)
12 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
13 Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Palgrave Macmillan, 2015)
14 (1819) 17 U.S. 4 Wheat 225
15 (1957) 98 CLR 93
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Contract Law
be deemed as justified only when the offering party contemplated this mode as the mode of
acceptance.
In the present case study, Harry had also made an offer for the painting to Kate and he had
provided that he was ready to purchase the painting for a consideration value of $3,000.
However, he stipulated that the acceptance had to be given to him in writing only. Based on
Eliason v Henshaw, this would be deemed as the valid mode of acceptance. As had been
instructed, Kate mailed a letter to Harry for accepting the offer made by him. This acceptance
was given at 12 pm on March, as the letter had been posted at that time. Once the offer is
accepted, Dickinson v Dodds dictates that it cannot be revoked.
So, the message left on the answering machine of Harry would not be of relevance due to a
contract already having being formed. This is due to two reasons; the telephone is not an
advantageous mode here for Harry but just for Kate. Further, the offer had already been accepted
and the revocation would not matter now. This is also based on Tallerman & Co v Nathan’s
Merchandise as telephone was not deemed as a mode of acceptance here, but post was. So, Harry
is right in claiming the painting. Not being able to provide this painting to Harry would result in
Kate breaching the contract, as the contract dictated that Kate sells the painting to Harry.
Thus, on the basis of this discussion, it can be concluded that a contract had been formed
between Kate and Harry. And Harry does have the right of claiming the promised painting at the
promised price. Where this is not done, Kate would have to bear liabilities arising from breach of
contract.
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Contract Law
Liz
The main issue of this case revolves around a possible contract being drawn between Kate and
Liz based on the facts provided in the case study.
As has been stated earlier, in order to create a contract, there is a need for certain important
elements to be present in the contract and these include the offer and acceptance. In context of
offer, it is important to make a differentiation between an offer and a request for information, and
even between an offer and supply for information16. Harvey v Facey17 is a case which proves to
be of assistance in this context. In this case, the defendant had been asked by the plaintiff
regarding if the bumper hall pen would be sold to the plaintiff and to post the lowest cash price
for it. The reply was given by the defendant on the lowest cash price and then the plaintiff agreed
to purchase this pen at the quoted price. The court held that there was no offer made in this case
as it was just a supply of information.
In the present case study, Liz asked for the giraffe painting being still for sale. This would be
deemed as request for information. The reply of yes given by Kate would be deemed as supply of
information. The offer was then made by Liz and this offer was accepted by Kate. This resulted
in a contract being formed between the two for the giraffe painting to be sold off by Kate to Liz
for $2,500.
Thus, on the basis of this discussion, it can be concluded that a contract had been formed
between Kate and Liz. Where Kate is unable to provide the giraffe painting to Liz for $2,500, she
would be held in breach of contract.
16 John W. Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed,
2007)
17 [1893] AC 552
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Contract Law
Bibliography
Articles/ Books/ Journals
Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)
Carter JW, Contract Law in Australia (LexisNexis Butterworths, 2013)
Carter JW, Peden E, and Tolhurst G, Contract Law in Australia (LexisNexis Butterworths, 5th ed,
2007)
Furmston M, and Tolhurst GJ, Contract Formation: Law and Practice (Oxford University Press,
2010)
Gibson A, and Fraser D, Business Law (Pearson Higher Education AU, 2013)
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
McKendrick E, and Liu Q, Contract Law: Australian Edition (Palgrave Macmillan, 2015)
Poole J, Casebook on Contract Law (Oxford University Press, 2016)
Cases
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Dickinson v Dodds (1876) 2 Ch D 463
Eliason v Henshaw (1819) 17 U.S. 4 Wheat 225
Harvey v Facey [1893] AC 552
Partridge v Critenden (1968) 2 All ER 425
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Contract Law
Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401
Re McArdle (1951) Ch 669
Tallerman & Co v Nathan’s Merchandise (1957) 98 CLR 93
Thomas v Thomas (1842) 2 QB 851
Legislations
Contract Law
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